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Updated: 18 min 59 sec ago

December Housing Market Preview

Thu, 01/21/2016 - 10:28

The official Existing-Home Sales are released tomorrow, Friday, January 22, 2016. However, savvy REALTORS® and real estate analysts know that some real estate data is already available from local sources.

What do these early December numbers tell us? In most of these areas, prices and sales were up for December (from one-year ago). For more details, visit the original source at the link listed below.

Are early stats available in your area? What does the market look like?

Source Link:

Colorado http://www.coloradorealtors.com/wp-content/uploads/2016/01/CAR-Colorado_MMI_2015-121.pdf Greater Seattle (NWMLS) http://www.northwestmls.com/index.cfm?/News–Information Metro District CO http://www.coloradorealtors.com/wp-content/uploads/2016/01/CAR-Colorado_Metro_MMI_2015-122.pdf Charlotte http://apps.carolinarealtors.com/files/Local%20Market%20Update%20Dec%202015.pdf Oklahoma City http://www.okcmar.org/wp-content/uploads/2016/01/Dec_2015_Press_Release.pdf Ada County Idaho http://publicstats.intermountainmls.com/static/Reports/Ada/2015/December-2015-Ada.pdf Spokane http://www.spokanerealtor.com/mls/market-snapshot

Martin Luther King, Jr. Day

Fri, 01/15/2016 - 13:33

Martin Luther King, Jr. Day is observed on the third Monday of January and marks the birthday of Rev. Dr. Martin Luther King, Jr. This holiday is also recognized as a day of service, and is an opportunity to serve your community. Based on the 2015 Member Profile we can see how REALTORS® are volunteering in their community.

  • Seventy percent of all REALTORS® volunteer in their community, and the typical REALTOR® who volunteers is 56 years old.
  • Twenty-four percent of REALTORS® aged 65 and older volunteer in their community.
  • Fifty-nine percent of the REALTORS® volunteering are females, and 41 percent are males.
  • The South showed the highest percentage of volunteers at 39 percent, followed by the West at 31 percent, the Midwest at 17 percent, and the Northeast at 14 percent.
  • Thirteen percent of volunteers were fluent in a language other than English.
  • REALTORS® who previously had a career in the management, business, or financial field were more likely than any other previous career to volunteer (19 percent).

Find more information on Martin Luther King, Jr. Day and opportunities to volunteer in your area at: http://www.nationalservice.gov/mlkday

View the Martin Luther King, Jr. Day infographic.

For more highlights on REALTORS® view the 2015 Member Profile.

 

November 2015 Housing Affordability Index

Thu, 01/14/2016 - 10:34

In spite of higher prices, housing affordability is down only slightly from a year ago as lower mortgage rates and higher incomes almost offset higher home prices.

  • Housing affordability declined slightly (2.6 percent), from a year ago in November in spite of a notable increase in prices. The median sales price for a single family home sold in November in the US was $221,600, up 6.6 percent from a year ago. This pushed the affordability index from 171.9 to 167.4.
  • Growing incomes and easing mortgage rates from a year ago helped to nearly offset the increase in home prices. Nationally, mortgage rates were down 15 basis points from one year ago (one percentage point equals 100 basis points) while incomes rose 2 percent. The reduction in mortgage rates from one year ago saves the median home buyer $16 per month on principal and interest payments at the current home price while income growth means the median family earns $111 more per month than November 2014.
  • Regionally, all four regions saw declines in affordability from a year ago. The West had the biggest decline in the affordability index of 2.9 percent followed by the Midwest and South. The affordability index in the Northeast slipped only 0.4 percent from one year ago.
  • Price movements were the biggest driver of affordability changes. The West had the biggest increase in price at 8.6 percent while the Northeast experienced the slowest price growth at 3.6 percent. The Midwest and the South fell in between with 5.2 percent and 6.5 percent, increase in home prices, respectively.
  • Seasonal fluctuations in price tend to drive month to month changes in affordability, but in November, a slight decrease in mortgage rates in most regions also had a role. Affordability is up 0.4 percent from one month ago in the US and increased slightly in the Midwest (1.4 percent) and West (1.8 percent). Affordability decreased slightly in the Northeast (1.9 percent) and South (0.1 percent).
  • Despite month to month changes, the most affordable region is the Midwest where the index is 213.7. This means that in the Midwest in November 2015, the median income family earned roughly 2.1 times the income that would be needed to qualify to purchase the median-priced home that sold in the same month. For comparison, the index is 176.1 in the South, 166.6 in the Northeast, and 121.6 in the West.
  • While the affordability index indicates that the median-priced home is affordable to the median family across the US, there is some room for concern. Price increases are great for owners who build up equity to use in subsequent home purchases, but rising rents make it difficult for potential new buyers to save for a down payment. Lending options from the Federal Housing Agency (FHA) and the Government Sponsored Enterprises (GSEs) enable would-be homeowners to make a home purchase with down payments as low as 3 to 3.5 percent, but many potential buyers are unaware of these programs. Realtors can play a valuable role in advising and educating potential clients about the options that are available to them.
  • What does housing affordability look like in your market? View the full data release here.
  • The Housing Affordability Index calculation assumes a 20 percent down payment and a 25 percent qualifying ratio (principle and interest payment to income). See further details on the methodology and assumptions behind the calculation here.

REALTORS® Expect Moderate Price Growth in Next 12 Months

Mon, 01/11/2016 - 15:24

In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® asks members “In the neighborhood or area where you make most of your sales, what are your expectations for residential property prices over the next year?”

REALTORS® who responded to the November 2015 survey expected prices to increase by 3.2 percent over the next 12 months (3.2 percent in October 2015; 3.0 percent in November 2014).9 REALTORS® expect the recent strong price growth to moderate as rising prices have made homes “unaffordable” for many, according to the November  2015 REALTORS® Confidence Index Survey Report.10

The map shows the median expected price change in the next 12 months for each state based on the September – November 2015 RCI surveys.10 REALTOR® respondents from Washington, Oregon, Wyoming, Colorado, and Florida were the most upbeat, with a median expected price growth in the range of four to five percent. Compared to expectations in previous months, no state had a median expected price growth of over five percent, an indication that prices are expected to rise at a modest pace in the next 12 months.

9 A comparison of the expected price growth for the next 12 months compared to the actual price growth shows the expected price growth to be more conservative than the actual price growth, but both are generally headed in the same direction.

10 In generating the median price expectation at the state level, we use data for the last three surveys to have close to 30 observations. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have less than 30 observations.

10 In generating the median price expectation at the state level, we use data for the last three surveys to have close to 30 observations. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have less than 30 observations.

Supply Conditions Continue to be “Weak” Across Most States in November 2015

Fri, 01/08/2016 - 10:22

In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® asks members “How would you rate the past month’s traffic where you make most of your sales?”

During the period September-November 2015, buyer traffic, measured by the REALTORS® Buyer Traffic Index, was “strong” in 24 states and “very strong” in the District of Columbia.[1]

Meanwhile, seller traffic, measured by the REALTORS® Seller Traffic Index, was broadly “weak” across most states.[2] The gap in demand and supply has led to strong price growth against modest gains in income, making a home purchase increasingly less affordable.  NAR median existing home sale prices were up 6.3 percent in November 2015 from a year ago, while median weekly earnings rose by 1.5 percent in Q3 2015 from the same period a year ago.

The construction of new privately owned housing units has been improving, reaching 1.2 million units in the third quarter of 2015. However, roughly 35 percent of recent new construction has been multi-family structures which are typically for rental occupancy. Historically, multi-family structures accounted for only 20 percent of new construction, so the availability of single-units for purchase among recently constructed properties is lower than is historically normal. REALTORS® reported low inventory of properties in the lower price range and for those that are move-in ready.

[1] The index for each state is based on data for the last three months to increase the observations for each state. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have less than 30 observations. Respondents were asked “How do you rate the past month’s buyer traffic in the neighborhood(s) or area(s) where you make most of your sales?” The responses were “Strong (100)”, “Moderate (50),” and “Weak (0).” Respondents rated conditions or expectations as “Strong (100)”, “Moderate (50)”, and “Weak (0).” The responses are compiled into a diffusion index. Values 25 and lower are considered “very weak”, values greater than 25 to 49 are considered “weak”, a value of 50 is considered “moderate”, values greater than 50 to 75 are considered “strong”, and values greater than 76 are considered “very strong”.

 

[2] Respondents were asked “How do you rate the past month’s seller traffic in the neighborhood(s) or area(s) where you make most of your sales?” The responses were “Strong (100)”, “Moderate (50),” and “Weak (0).” Respondents rated conditions or expectations as “Strong (100)”, “Moderate (50)”, and “Weak (0).” The responses are compiled into a diffusion index. Values 25 and lower are considered “very weak”, values greater than 25 to 49 are considered “weak”, a value of 50 is considered “moderate”, values greater than 50 to 75 are considered “strong”, and values greater than 76 are considered “very strong”.

 

Veteran Ownership Outpaces Non-Veterans

Thu, 01/07/2016 - 15:24

Historically, the homeownership rate for veterans of the United States military has outpaced that of non-veterans. At the peak of the market in 2006, the ownership rate for veterans was 79.5 percent[1], 12.3 percentage points higher than that of non-veterans. Like non-veterans, the ownership rate for veterans fell sharply in the subsequent years and stood at 76.0 percent in 2014, but the gap between the two groups grew to 13.5 percentage points.

The ownership rate for active duty veterans tells a different story. The ownership rate for active duty veterans has on average been lower than that of non-veterans. This difference likely reflects lower median age and job mobility. However, the ownership rate for active duty military personnel fell sharply from 47.7 percent at its peak in 2005 to a low of 32.9 percent in 2013. Active duty homeownership bounced to 34.7 percent in 2014, but remains historically low.

The Veterans Administration offers excellent mortgage products and terms and remains a strong source of funding for veterans seeking to purchase a home. Still, the decline in homeownership among active duty personnel over the last decade may reflect underlying demographic, mobility, and geographic changes that will take time to normalize. More research on this topic is necessary.

[1] Defined as any level of service, active or not.

Highlights of November 2015 REALTORS® Confidence Index Survey

Wed, 01/06/2016 - 11:24

Market conditions vary across local markets and states, but the REALTORS® confidence and traffic indices indicate no substantial change in market activity in November 2015 compared to October 2015. However, compared to a year ago, market activity improved, according to the November 2015 REALTORS® Confidence Index Survey Report.

Sustained job creation, the low interest rate environment, and measures to reduce the cost of borrowing and make credit more accessible to responsible borrowers continue to bolster the housing market recovery. However, the implementation of the TILA/RESPA Integrated Disclosure (TRID) regulations on October 3, 2015 appears to be delaying the settlement of contracts and impacting sales. About 47 percent of respondents reported longer closing times compared to a year ago, up from 37 percent in the October 2015 survey.

First-time home buyers accounted for 30 percent of sales, essentially unchanged from the previous months’ figures. Cash sales rose to 27 percent of sales as purchases for investment purposes also increased to 16 percent of sales and distressed properties rose to nine percent of sales. Properties typically were on the market 54 days nationally compared to 65 days a year ago. It typically took another 40 days to close a sale, up from 35 days in August 2015.

Tight inventories, decreasing affordability, and more stringent credit standards continued to be reported as key issues affecting sales, especially of first-time homebuyers. “Late” and “low” appraisal valuation, tighter inspection guidelines, and difficulty in obtaining financing for condominium purchases were also reported as factors weighing down the market recovery.

Student Loan Debt Hampering Home Buying: A Regional Perspective

Tue, 01/05/2016 - 15:39

In the 2015 Profile of Home Buyers and Sellers survey, we asked additional questions this year regarding the adversity to saving for a down payment to buy a home and whether student loans were an impediment. In years past, the down payment had been cited as one of the most problematic steps in the home buying process. In 2014, 12 percent of people said that saving for the down payment was the most difficult step and, among those, 46 percent reported having student loan debt.

In 2015, the number grew slightly to 13 percent of buyers that had difficulty saving for the down payment and, of those, jumped to 51 percent that reported student loan debt made saving the most strenuous step in the buying process. For first-time buyers in 2015 who are predominantly Millennials under the age of 34 year old, 25 percent said saving for the down payment was the more arduous step in the process and, of those, 58 percent stated that student loan debt delayed them from buying a home.

 

For all buyers this year, a quarter reported having student loans. For first-time buyers, 41 percent cited still having student loans with a median amount of $25,000 in debt.

What’s more interesting is the amount of student loan debt that respondents cited around the country by sub-region. The median student debt was the lowest at $15,000 in the South Atlantic states of Delaware, Maryland, Washington, DC, West Virginia, Virginia, North Carolina, South Carolina, Georgia, and Florida. The median student loan debt was highest at $70,000 in East South Central region of Kentucky, Tennessee, Mississippi, and Alabama.

A majority of the regions reported student loan debt delaying buyers from purchasing a home of a median of three years except for in the New England and West South Central, which reported a delay of five years, and the Middle Atlantic region, which was delayed four years.

It begs speculations whether jobs in the South Atlantic near the nation’s capital could be more abundant and that salaries are likely higher than other regions of the country. Thus, the amount of student loan debt reported is lowest in these states. In the East South Central region, jobs and wages are suppressed and thus the amount of student loan debt reported is nearly five times that of the South Atlantic. It also warrants further research into how the number of jobs and salaries on the market affect student loan debt thus delaying younger buyers from purchasing a home for three to five years.

Additional research shows that debt is lower where income is higher. For instance, a USA Today article that tracked the 10 states with the highest rate of student loan debt in 2014 and found that states student loan debt was higher in the Northeast where private schools are more expensive. The article further draws the conclusion that having higher debt due to student loans can dissuade people from purchasing homes, cars, and other goods that stimulate the economy. More research correlating student loan debt by state and incomes seems to be warranted in the near future.

REALTORS® Reported Slower Buyer and Seller Traffic in November 2015

Mon, 01/04/2016 - 15:19

In the monthly REALTORS® Confidence Index Survey, the National Association of REALTORS® asks members “How would you describe the past month’s housing market in the neighborhood or area where you make most of your sales?”

The responses are aggregated into a REALTORS® Buyer Traffic Index, with a value of 50 indicating an equal number of “strong” and “weak” responses. The November 2015 index eased down to 50 compared to its level of 52 in October 2015, but was higher compared to last year’s index of 43, according to the November 2015 REALTORS® Confidence Index Survey Report (http://www.realtor.org/reports/realtors-confidence-index).[1]

Sustained job creation, the low interest rate environment, and measures to reduce the cost of borrowing and make credit more accessible to responsible borrowers continue to bolster the housing market recovery. However, the implementation of the TILA/RESPA Integrated Disclosure (TRID) regulations on October 3, 2015 appears to be delaying the settlement of contracts and impacting sales. About 47 percent of respondents reported longer closing times compared to a year ago, up from 37 percent in the October 2015 survey.

[1] The index for each state is based on data for the last three months to increase the observations for each state. Small states such as AK, ND, SD, MT, VT, WY, WV, DE, and D.C., may have less than 30 observations. Respondents were asked “How do you rate the past month’s buyer traffic in the neighborhood(s) or area(s) where you make most of your sales?” The responses were “Strong (100)”, “Moderate (50),” and “Weak (0).” Respondents rated conditions or expectations as “Strong (100)”, “Moderate (50)”, and “Weak (0).” The responses are compiled into a diffusion index. Values 25 and lower are considered “very weak”, values greater than 25 to 49 are considered “weak”, a value of 50 is considered “moderate”, values greater than 50 to 75 are considered “strong”, and values greater than 76 are considered “very strong”.

 

Raw Count of Home Sales (November 2015)

Mon, 01/04/2016 - 11:06
  • Existing-home sales decreased 10.5 percent in November from one month prior while new home sales increased 4.3 percent. These headline figures are seasonally adjusted figures and are reported in the news. However, for everyday practitioners, simple raw counts of home sales are often more meaningful than the seasonally adjusted figures. The raw count determines income and helps better assess how busy the market has been.
  • Specifically, 351,000 existing-homes were sold in November while new home sales totaled 34,000.  These raw counts represent a 21 percent loss for existing-home sales from one month prior while new home sales decreased 11 percent. What was the trend in the recent years? Sales from October to November decreased by 13 percent on average in the prior three years for existing-homes and 11 percent for new homes. So this year, existing-homes underperformed compared to their recent norm while new home sales performed the average of the last three years.
  • Why are seasonally adjusted figures reported in the news? To assess the overall trending direction of the economy, nearly all economic data – from GDP and employment to consumer price inflation and industrial production – are seasonally adjusted to account for regular events we can anticipate have an effect on data around the same time each year. For example, if December raw retail sales rise by, say, 20 percent, we should not celebrate this higher figure if it is generally the case that December retail sales rise by 35 percent because of holiday gift buying activity. Similarly, we should not say that the labor market is crashing when the raw count on employment declines in September just as the summer vacation season ends. That is why economic figures are seasonally adjusted with special algorithms to account for the normal seasonal swings in figures and whether there were more business days (Monday to Friday) during the month. When seasonally adjusted data say an increase, then this is implying a truly strengthening condition.
  • What to expect about home sales in the upcoming months in terms of raw counts? Independent of headline seasonally adjusted figures, expect busier activity in December for existing-home sales. For example, in the past 3 years, December sales typically increased by 7 to 18 percent from November. In contrast, existing-home sales dropped in January by 22 to 32 percent. For the new home sales market, the raw sales activity in December tends to be better than that occurring in November, and activity gets even better in January. For example, last year, December sales rose by 13 percent from November while January sales rose by 6 to 14 percent in the past 3 years.

Did you know? The Minimum Wage

Thu, 12/31/2015 - 10:33

On January 1, 2016 the minimum wage will rise in 14 states. What is the minimum wage in your area? How do minimum wage workers interact with the housing market in your area?

Regardless of one’s position on the minimum wage, it is helpful to learn more about it. The federal minimum wage is prescribed by the Fair Labor Standards Act (FLSA). Effective July 24, 2009, the federal minimum wage is $7.25 per hour. While there are provisions for some types of employees to be paid less than the minimum wage, (i.e. youth, some students, and tipped workers) the wage can generally be thought of as a national floor for wages.[1]

How many workers are affected by the minimum wage? According to research from the Bureau of Labor and Statistics (BLS) based on the Current Population Survey (CPS), there were 146.3 million workers in the United States in 2014. As shown in Figure 1, of these, 77.2 million were paid hourly wages. The other 69.1 million are either salaried, self-employed, or have some other non-hourly arrangement. Out of the 77.2 million who reported hourly wages, 3.0 million reported an hourly wage rate equal to or less than the Federal Minimum Wage, currently $7.25 per hour.[2] Other studies show that an additional 10 to 25 million workers earn “near-minimum” wages with the result varying with the specific definition of near-minimum.[3]

Some states already have wage laws that stipulate minimum wages above the federal minimum wage. On January 1, 2016, the minimum wage will rise in 14 states—in one dozen because of recent legislative action and in two because of automatic costs of living adjustments. Two additional states and the District of Columbia have increases scheduled for mid-2016 and Nevada has a cost of living increase which may occur in July. As of January 1, 2016, two states, California and Massachusetts, will have minimum wages of $10.00. They join a handful of localities, including the District of Columbia, with double-digit minimum wages.[4]

How does a minimum wage job translate into housing affordability? We converted each state’s minimum wage into an annual income assuming full-time work of 40 hours per week for 50 weeks per year.[5] We then computed the dollar amount that would represent an affordable monthly payment, no more than 25 percent of income for mortgage principal and interest.[6] From that monthly payment, we calculated an affordable loan amount, for a thirty-year fixed rate mortgage at a 4 percent interest rate.[7] To facilitate a broader housing market comparison, we also calculated an affordable monthly rent.[8] The data for each state and the District of Columbia is shown in the figure below. While we know that minimum wage workers come from families of all income levels, data from the EPI show that the average share of income earned by a near-minimum wage worker is just over half (54.3%).[9] Additionally, nearly one-quarter (23.7%) of these workers are the sole providers of family income.[10]

In Washington, DC, where the minimum wage is the highest, a minimum wage worker could make payments on a mortgage loan of $91,600 or qualify to rent an apartment with a monthly rent of $525. In the highest wage states, Massachusetts and California, a single minimum wage income could be sufficient to finance a mortgage loan of a little more than $87,200 or qualify to rent an apartment with a monthly rent of $500. By comparison, in areas where the federal minimum wage prevails, a minimum wage worker could make payments on a mortgage loan of just over $63,200 or qualify to rent an apartment with a monthly rent of $363.

Finding affordable homes is likely to be difficult as these amounts are well under the national median. While there are homes in these price ranges in some locations, they are getting harder to find. From recent Existing Home Sales data from the National Association of Realtors®, we know that sales of homes priced under $100,000 have been declining. In 2015 through November, sales under $100,000 were 8.5 percent lower than the same period in 2014. Given strong demand, limited supply, and continued low construction, these trends are likely to continue. What does affordability for minimum wage workers look like in your area?

For more information from NAR Research on affordability, visit realtor.org. For similar information on affordability for workers of specific occupations with an emphasis on Millennials and their occupations, see the National Housing Conference’s 2015 Paycheck to Paycheck report and data.

[1] Department of Labor, http://www.dol.gov/whd/minimumwage.htm

[2] Per the BLS report, this figure is based on the hourly wage only and does not include overtime pay, tips, or commissions. For details, see: Characteristics of Minimum Wage Workers, 2014. http://www.bls.gov/opub/reports/cps/characteristics-of-minimum-wage-workers-2014.pdf

[3] A review of CPS data by the Economic Policy Institute (EPI) estimates that a total of 13 million workers earn hourly wages of $10 or less and 28 million earn $12 or less. The EPI study uses a different methodology than the BLS for estimating worker wage rates and does include salaried workers (which the BLS excludes). However, the EPI estimate for workers at or below the current federal minimum wage (2.5 million – 2016) is consistent with the BLS estimate (3.0 million – 2014). See appendix table 1: http://www.epi.org/publication/raising-the-minimum-wage-to-12-by-2020-would-lift-wages-for-35-million-american-workers/. A review of 2014 CPS data by the Pew Research Center found 20.6 million “near-minimum” wage workers. This review examined workers making more than the minimum that applies in their state, but less than $10.10 per hour. http://www.pewresearch.org/fact-tank/2014/11/05/making-more-than-minimum-wage-but-less-than-10-10-an-hour/

[4] For information on local minimum wages see the Society of Human Resource Management, http://www.shrm.org/hrdisciplines/compensation/articles/pages/minimum-wage-state-local-2016.aspx

[5] For areas where there is no minimum wage or where there is a lower minimum wage than the federal minimum wage, we used the highest applicable wage (i.e. the federal minimum wage).

[6] Other affordability calculations make an estimate for property insurance and taxes. Generally, when mortgage principal, interest, taxes, and insurance are included, the threshold for affordability is 28 percent. Because we exclude consideration of taxes and insurance, we use a 25 percent threshold here. Put another way, our estimation is comparable to a 28 percent affordability ratio when taxes and insurance are 3 percent of income.

[7] This calculation makes no adjustment to the interest rate for mortgage insurance which is likely required for those making down payments for home purchase of less than 20 percent. This calculation also does not adjust for borrower characteristics such as credit score or other debt outstanding which may raise the interest rate at which a borrower can secure a loan and/or reduce the total amount that can be borrowed.

[8] Affordable monthly rent assumes that 30 percent or less of monthly income can go toward rent.

[9] The EPI figure is for “affected” workers, those who earn $13 or less by 2020 and would be directly or indirectly impacted by an increase in the federal minimum wage to $12 by 2020. http://www.epi.org/publication/raising-the-minimum-wage-to-12-by-2020-would-lift-wages-for-35-million-american-workers/

[10] Ibid. The figures in the table best approximate the situation for workers who are sole providers, but given the average share of family income earned by these workers, doubling the affordable loan and rent amounts may be the best representation of what is “typical.”

Case Shiller House Prices

Tue, 12/29/2015 - 10:41

•Today, Case Shiller released their housing price index data for October 2015.  Case Shiller data showed that house prices rose roughly 5 percent in all three indices since October 2014.  The 10-city composite gained 5.1 percent, the 20-city composite rose 5.5 percent, and the national index showed a gain of 5.2 percent year over year.  Each index’s October year over year gain was higher than the September year over year gain.

•After growing at a fairly steady pace earlier in 2015, the Case Shiller indices have begun to show acceleration or faster growth in prices in the last 3 to 8 months, depending on the specific index used.

•Last week the Federal Housing Finance Agency (FHFA) and the National Association of Realtors® (NAR) reported price data.

•FHFA data showed that prices were up 6.1 percent in October from one year ago, the same rate of change seen in September but faster than the 5.4 to 5.6 percent year over year growth seen in the earlier part of the year.

•NAR data showed that prices grew at a 5.6 percent pace from October 2014 to October 2015, in between the Case Shiller and FHFA measures.  NAR also reported on new November data which showed a bump up to a 6.3 percent growth from one year ago.

•Recent housing price data at the national level suggests that home prices continue to increase at a strong pace and the pace of increase may be accelerating. Strong buyer demand and low inventories coupled with still relatively low levels of new construction are continuing to push prices up and keep housing market tipped in favor of sellers in most local markets.

•Of course, potential buyers and sellers should be sure to put the national numbers in the context of what is going on in their local markets. The fastest overall growth rates were seen in Denver, San Francisco, and Portland in the year ending October 2015 with each market showing 10.9 percent increase over October 2014. By contrast, Washington DC (1.7%), Chicago (1.3%), and Cleveland (2.2%) were the slowest growing markets. Data shows that sellers in these somewhat weaker areas may not have as much power to demand higher prices for their homes given the local market. How does your market compare to the national price trends?

•NAR reports the median price of all homes that have sold while Case Shiller and the Federal Housing Finance Agency report the results of a weighted repeat-sales index. Case Shiller uses public records data which has a reporting lag. To deal with the lag, Case Shiller data is based on a 3 month moving average, so reported October prices include information from repeat transactions closed in August, September, and October. For this reason, changes in the NAR median price tend to lead Case Shiller and may suggest that additional strong price growth could be on the horizon. The current strong pace is a reflection of continued demand from buyers in a steady economy and the still low supply of homes for sale. While affordability is a concern in an environment where home price growth is outpacing income growth, demand has generally been strong enough to shake off this concern.

Heating your Home for the Holidays

Wed, 12/23/2015 - 11:39

When deciding on a home to purchase, recent buyers took into consideration a variety of different environmental features. The feature that was most important to buyers was heating and cooling costs. Eighty-four percent of recent buyers found heating and cooling costs to be at least somewhat important when deciding on a home to purchase. Thirty-five percent of buyers found heating and cooling costs to be very important. Using data from the 2015 Profile of Home Buyers and Sellers, we can see which buyers find heating and cooling costs most important.

  • Buyers in the Northeast (42 percent) and the South (38 percent) were more likely than other regions to find heating and cooling costs to be very important.
  • Heating and cooling costs were more important to buyers who purchased newer homes.
  • Only thirty percent of buyers who purchased a home built between 2000 and 1986 found heating and cooling costs to be very important, compared to 50 percent of buyers whose house was built in 2014.
  • Eighty-three percent of buyers purchased a detached single-family home, which was typically a median of 1,900 square feet.
  • Seventy-six percent of buyers who found heating and cooling costs very important purchased previously owned homes.

This holiday season at NAR’s two offices show that heating may not be necessary. In Washington, D.C. the forecast shows an unseasonably warm end to the week with temperatures in the 60’s and 70’s. In Chicago the rest of the week is forecast to drop to the mid 40’s.

Washington, DC

Chicago, Il

Via weather.com

For more information on today’s home buyers and sellers view the 2015 Profile of Home Buyers and Sellers.

TRID: Adding Time and Costs

Tue, 12/22/2015 - 10:51

The first effects of the new Know Before You Owe or TILA RESPA Integrated Documentation (TRID) rules are now measurable. The changes created some confusion among lenders and closing agents and the average time-to-close has risen as a result. The industry is at the short end of the learning curve, so this impact will likely ease with time.

The new TRID rules have been in effect since October 3rd. Historically, a typical close took roughly 30 days so few closings in October would reflect the new TRID process. However, with November complete we can begin to measure the impact.

A special data sample was utilized to create a time series for time-to-close; the time in days from when a listing goes under contract until it is complete. A primary driver of time-to-close is the volume of mortgage applications, both refinances and purchases. Both series are charted below in 4-week moving averages to mute the weekly volatility.

Here are some of the principal takeaways:

  • Applications volume typically falls in November
  • In 2013 and 2014, time-to-close fell with applications volume
  • Applications volume fell in November of this year, while time-to-close spiked
  • There was a bulge of applications in August through October, but these should have been worked out by November and they did not impact earlier timelines
  • Time-to-close rose to an average of 40.5 days in November of 2015 from 35.9 in November of 2014, a 12.8% increase.
  • Time-to-close peaked at 41.2 days in the 4th week of November

While early indications are that TRID has delayed some closings, anecdotal evidence suggests that sales are still likely to close. Consequently, the impact to home sales volume and statistics should be transitory. The change will cause a one-period shift in sales to the next month and each subsequent month will have a full month’s tally of sales. As time-to-close declines, there may be a modest increase to monthly sales as the market catches up. This shift may modestly impact the seasonal factors used to adjust economic time series of home sales.

In the long-term, lenders and closing agents may adjust to the new environment reducing the time-to-close. In the near term, consumers are likely to require a 45-day lock period rather than the standard 30-day. This could add $100 to $300 onto the cost of closing.

How Many Houses are Vacant at Your Zip Code?

Wed, 12/16/2015 - 10:38

Housing vacancies are currently at the lowest levels since at least 2005, according to the Census Bureau estimates. Nationally, the rental vacancy rate was 7.3 percent while homeowner housing rate was 1.9 percent for the third quarter 2015.

But how did housing vacancy rate[1] change at a local level between 2014 and 2011? American Community Survey (ACS) recently published overall vacant housing estimates for zip codes for 2014. Of the 32,634 zip codes, 79 percent had vacancy rate  less than 25 percent, 16 percent had 25 to 50 percent, 4 percent had 50 to 75 percent, and 1 percent had 75 percent and higher. Pennsylvania (8.5% of the housing units) and New York (5.9% of the housing units) had the most zip codes with zero percent housing vacancy rate.

At metro area level, here is a summary of the areas with the lowest and highest housing vacancy rate in 2014:

Lowest Housing Vacancy Rate

Metro Area Vacancy Rate

2014 Vacancy Rate 2011 San Jose-Sunnyvale-Santa Clara, CA

4.0%

4.8%

Iowa City, IA

4.3%

6.6%

Ames, IA

4.5%

5.0%

Provo-Orem, UT

4.8%

5.3%

Lancaster, PA

5.1%

4.8%

 

Highest Housing Vacancy Rate

Metro Area Vacancy Rate

2014 Vacancy Rate 2011 Ocean City, NJ

58.4%

54.5%

Barnstable Town, MA

41.4%

39.4%

Myrtle Beach-Conway-North Myrtle Beach, SC

38.9%

38.6%

Salisbury, MD

38.7%

13.7%

Naples-Marco Island, FL

36.8%

39.1%

 

The lowest vacancy rates are in metro areas with strong job gains and/or too few new home constructions. The highest vacancy rates are in metro areas with many vacation homes.

At state level, the most occupied housing units were located in California while Maine experienced the highest housing vacancy rate in 2014.

Select a zip code below to view housing statistics from 2011 to 2014 relative to the metro area and state level.

[1] Housing Vacancy Rate was computed based on the following formula:

 

Housing Starts: Spring May Bring Tight Supply Conditions

Wed, 12/16/2015 - 10:09
  • Here is a look at the latest housing starts for November 2015.
  • New home construction rose significantly in the latest month and is on track for most activity since 2007. Still, significantly more construction is needed to relieve the housing shortage that is developing and will become very visible once the spring home buying season returns.
  • Numerically, housing starts reached 1.17 million in November, an increase of 10.5 percent from the prior month and up 16.5 percent from 12 months ago. Multifamily activity continues to be solid at 405,000 units at an annualized rate and single-family construction at 768,000 broke to its highest mark since early 2008.
  • The gains are partly reflecting a low base comparison point. Housing starts, particularly of single-family units, have been very sluggish for multiple years. Overall housing starts need to reach 1.5 million just to reach the historical annual average. Considering that there is an inventory shortage of homes for sale and historically low apartment vacancy rates, a figure of 1.7 million may be needed to fully return to balanced market. This year, even with good gains in November, looks to hit only 1.1 million new housing units. That’s grossly inadequate.
  • Homebuilders do not have many problems finding a buyer. It is taking less than 3 months to find a buyer. Yet they are not aggressively building. The reasons are twofold. First, many small mom-and-pop builders are having difficulty obtaining construction loans from local lenders because of new financial regulations. Second, even if a construction loan can be found, finding skilled construction workers have been very difficult.
  • REALTORS® in many markets across the country should brace for tight supply conditions once the spring buying season returns. The affordability issue will heighten as a result.

Latest Consumer Price Inflation (November 2015)

Tue, 12/15/2015 - 10:44
  • There was a slight uptick in the broad consumer inflation measure in November. More interesting is the housing components, which continue to show high figures. Housing shortage still persists and this condition will jack-up the broad inflation rate in 2016. The Fed then will have to raise interest rates few additional times.
  • Numerically, the broad CPI inflation rose 0.4 percent from one year ago, though less than one percent it is the highest of the year. Directionally therefore some upward shift could be developing. One key contributor to the rise is that renters’ rents are rising at 3.6 percent and homeowners equivalence rents are rising at 3.1 percent. This high rate is a reflection of housing shortage. Homebuilders are still sluggish in putting up new homes so the shortage and high housing costs will likely continue into 2016.
  • Based on trends and assumption of no further price declines in gasoline prices in 2016, the overall CPI could surpass 2 percent and possibly reach 3 percent. That means, the Federal Reserve will likely raise interest rates two or three times in 2016.
  • On other matters, don’t smoke. Smoke products are rising by 3.7 percent. Those who have suffer smoke related illness, doctor fees are accelerating, now rising by 3.1 percent. For more serious issues, hospital fees are rising even faster at 4.7 percent.
  • For holiday shopping, women’s apparel prices are lower this year by 3 percent (no price discount on men’s clothes); while electronic products where prices have fallen by 6 percent.

October Housing Affordability Index

Fri, 12/11/2015 - 10:04

At the national level, housing affordability is down from a year ago and up for the month of October as both mortgage rates and home prices declined modestly.

•Housing affordability is down from a year ago in October as the median price for a single family home in the US is up from a year ago. Regionally, the West had the biggest increase in price at 8.3 percent while the Northeast experienced the slowest price growth at 1.5 percent. The Midwest had a price gain of 5.7 percent while the South had a price gain of 6.4 percent.

•The median single-family home price is $221,200 up 6.3 percent from October 2014. October’s mortgage rate is 4.05, down 24 basis points (one percentage point equals 100 basis points) from last year. Nationally, affordability is down from 168.6 in October 2014 to 166.3 in October 2015.

•Affordability is up from one month ago in all regions, and the Northeast had the largest jump of 4.4 percent while the West was flat at 0.6 percent. From one year ago, affordability is up in the Northeast 3.1 percent but down in all other regions. The West saw the biggest decline in affordability at 2.4 percent and the South had the smallest decline of 0.9 percent.

•Despite month to month changes, the most affordable region is the Midwest where the index is 209.9. The index is 176.0 in the South, 169.6 in the Northeast, and 119.8 in the West. For example, it is very easy to buy a home in Indianapolis and Cincinnati.

•Some markets are seeing dips in affordability due to prices outpacing incomes and previous unhealthy price gains. This maybe a favorable time for those who want to get into the market as home price growth slows and mortgage rates remain low.  Return buyers can discover opportunities to use equity to position themselves to make another home purchase. If home prices continue to mature at 5 percent growth rate next by October next year, the median home price could be around $224,000. With mortgage rates expected to rise to the 4 percent range and fewer properties to choose from the cost of purchasing a home could become more expensive.

•What does housing affordability look like in your market?  View the full data release here.

•The Housing Affordability Index calculation assumes a 20 percent down payment and a 25 percent qualifying ratio (principle and interest payment to income).

See further details on the methodology and assumptions behind the calculation here.

E-Commerce Drives Warehouse Space Demand in Q3.2015

Fri, 12/11/2015 - 09:47

Economic activity slowed in the third quarter of this year. Real gross domestic product (GDP) advanced at a recently revised annual rate of 2.1 percent, according to the Bureau of Economic Analysis’s estimate. In comparison, second quarter growth measured 3.9 percent, while the third quarter 2014 rate of growth was 4.3 percent.

International trade took a milder pace in the third quarter, as slower growth in the Chinese economy and higher global economic volatility coupled with a stronger dollar impacted exporters. Real net exports totaled a negative $536.2 billion during the quarter, virtually unchanged from the prior quarter.

Retail e-commerce sales totaled $87.5 billion in the third quarter of the year, a 15.1 percent annual growth rate, according to the Census Bureau. Consumers have embraced the on-line platforms, placing distribution centers in a central role fulfilling orders.

The number of net new jobs increased in the third quarter of 2015, but at a slightly slower pace compared with the same period in 2014. During the quarter, 501,000 net employees were added to payrolls nationwide, bringing the total for the January to September period to 1.8 million. Average weekly earnings of private employees—adjusted for inflation—rose by 2.3 percent in the third quarter of this year. With demand for industrial properties rising, transportation and warehousing employment gained 23,700 new positions, while wholesale trade employment rose by 4,000 jobs.

The industrial sector posted a strong third quarter, with rising demand and declining vacancies. Industrial net absorption totaled 61.9 million square feet in the third quarter, bringing the total for the first nine months of 2015 to 164.8 million square feet, according to JLL. Warehouse and distribution centers accounted for the lion’s share of demand, followed by manufacturing. Supply picked up as well, with new completions ringing at 50.2 million square feet in the third quarter. Demand continued outpacing supply, driving industrial vacancies down to 6.7 percent, a 14-year low, according to JLL. With a tight market, industrial rents rose 6.0 percent, to an average of $4.89 per square foot in the third quarter.

Fundamentals in REALTORS® CRE markets moved in tandem with the broad markets during the second quarter 2015. Leasing volume during the second quarter rose 5.0 percent compared with the first quarter 2015. Leasing rate growth remained steady, rising 3.0 percent in the second quarter, compared with the 3.0 percent advance in the previous quarter. Industrial availability posted the largest year-over-year decline—246 basis points—to 10.8 percent.

Commercial fundamentals continued improving during the third quarter 2015. Leasing volume during the second quarter rose 3.8 percent compared with the second quarter 2015. Leasing rates advanced at a steady pace, rising 2.5 percent in the third quarter, compared with the 2.7 percent advance in the previous quarter. Industrial vacancies reached 11.5 percent during the third quarter.

Tenant demand remained strongest in the 5,000 square feet and below, accounting for 72 percent of leased properties. However, demand for space in the 5,000 – 7,499 square feet more than doubled during the third quarter, comprising 13 percent of total. Lease terms remained steady, with 36-month and 60-month leases capturing 64 percent of the market.

To access the Commercial Real Estate Outlook: 2015.Q4 report visit http://www.realtor.org/reports/commercial-real-estate-outlook.

Buffers for TRID’s Learning Curve

Thu, 12/10/2015 - 15:47

The new Know Before You Owe or “TRID” closing process could help consumers, but it could also create issues for consumers in the short-term. According to the 3rd Quarter Survey of Mortgage Originators, lenders are recommending longer rate locks and are hesitant to extend pre-approval letters in some cases. Lenders and Realtors® are currently working to address these issues while closing sales at a steady clip.

On October 3rd, the new Know Before You Owe disclosure process and rules, also known as the TILA RESPA Integrated Documentation (TRID), were implemented. Under TRID the current closing documentation is streamlined and features are added to help consumers better understand their financial commitment. The new set of rules includes stricter tolerances for changes in fees and introduces new time lines for the process.

When asked their degree of confidence in their own preparations for the new TRID rules, 95.0 percent indicated a score of “3” or better, but only 20.0 percent indicated they were fully confident.

Because of potential delays under the new process, some lenders are counseling their clients for longer rate locks than the standard 30-day. At the implementation of TRID, 60.0 percent of respondents in this survey recommended the addition of 15 days to the standard rate lock (45 days total), while 25.0 percent recommended no change. The extension of a rate lock would add expense to the transaction. On a $200,000 mortgage, adding 15 or 30 days to the standard 30-day rate lock could garner of a fee of $100 to $300.

Another potential issue is reluctance on the part of some lenders to offer pre-approval letters. 35.0 percent of respondents indicated that the new rules would moderately affect their willingness to extend pre-approval letters, while 5.0 percent indicated the effect would be significant. Originators’ reluctance arises from two issues: misconceptions about the new definition of an application (versus a pre-approval), which triggers disclosures under TRID, and the prohibition of lenders from requiring information like income verification that would be used in an application for a pre-approval. The lending industry is actively discussing and seeking clarification and consensus on these issues.

The Know Before You Owe rule is just a month old and the industry faces a steep learning curve. Luckily these changes come during the normal seasonal slowdown. Furthermore, anecdotal evidence from Realtors® suggests few issues to date. Lenders’ preventative measures such as longer lock periods and limits extending pre-approvals may ease over time as they gain more clarity on the rule.

 

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